As with so much on Wall Street, the real estate mega-funds have become successful in recent decades, and huge. There is no denying the sophisticated management of a Blackstone Group, a Carlyle Group or Starwood Capital, or their shrewd and experienced insights into global property markets. But with such heft comes seemingly inevitable bureaucratization, and investor returns that regress to the mean, or mirror the market.

1. The mega-fund cannot think small.

If “investment-grade” or class A properties become pricey, the mega-funds with their billions of dollars to invest often have little option but to pay the piper, and hope to improve property performance in years ahead—which is why there is often discussion about “re-positioning” a product after mega-fund purchase. To be sure, there are exceptions, and mega-funds have adapted by shifting to riskier “opportunistic funds” and other options, but such new efforts often underscore that mega-funds are competing with each other’s bank accounts and vast debt resources for the same limited product. That’s survivable in an up-cycle, but if times change?

2. The large institutional investor cannot devote the due diligence and necessary research time to most suburban property markets.

The mega-fund cannot afford to delegate research hours to the due diligence a lone submarket requires, in which only a single acquisition might be justified, and a “small” purchase at that. Remember, mega-funds have a lot of zeroes (i.e., big checks) when investing. If specific or scattered suburban markets are where the future value is, a mega-investor may be forced to forego the opportunity.

3. Loss of meaningful influence.

Suffice it to say, if a Family Office or high net worth individual should suddenly wish to change investment directions, the mega-fund super-tanker could not change course, even if so inclined. Most large property investment vehicles are governed by charter, that is, must keep investing in a set property type, geography, or debt-to-equity ratios. Additionally, there is limited liquidity for investors. And while many large private-equity funds clarified fees after 2008 (when they needed clients), there are still enough quirks that investors are advised to closely review mega-fund expenses and payouts.

4. A passive investment can result in a “passive” performance.

The more a Family Office or individual becomes passive investor, the more one obtains the returns that passive investors “deserve.” That is not a pejorative statement; it is simply a market reality. Joining a league of investors in a mega-fund is a passive undertaking that embeds an investor in a large institutional structure with attendant overhead. Consider a more targeted fund run by managers who have institutional experience but are hands-on, communicative and operationally transparent. These are partners that can flex, find deals and stay on top of how the assets are being managed for often greater return.